Chinese Aviation Company Seeks Business Jet PartnersMarch 18, 2011

 

China continues to make progress on its plans to build a domestic aviation industry. It has flight tested the ARJ21-700, short for Advanced Regional Jet for the 21st Century. The country also has begun to assemble Airbus A320 short- to medium-range planes, at a plant that is 49% owned by Airbus and 51% owned by a Chinese consortium. The country's nascent aviation industry hopes to learn from its partnership and build its own jumbo jet by 2020.

But in a bid to also crack into the business jet sector, the Chinese fighter builder Avic Defense is talking to several major Western business jet makers as potential partners, according to Aviation Week.

The companies negotiating with Avic are tempted by the prospect of manufacturing planes at a lower cost in China, but like any company doing business there, they are also worried that they will be training their future competitors. So far the Western commercial business jet makers have not agreed to any partnerships, but China is continuing to negotiate, according to the Aviation Week article.

If partnerships don't materialize, Avic has another powerful strategy in the wings: buying the expertise it needs. The state controlled company is flush with capital and has already repeatedly bought Western companies with the knowledge China lacked, according to the article.

"The purpose is to bring manufacturing within the country so they can do it themselves," Nathan K. Smith, an aerospace and defense analyst at the research and consulting firm Frost & Sullivan told Knowledge@Wharton. "However, China does not have the expertise and is heavily dependent on Western technology."

China will also have to invest heavily in establishing a strong inspection infrastructure and to make sure the international airliner market and the international traveler is fully aware of the safety of its products.

"If they are going to be competitive, they must overcome any perception that they are somehow lax in the enforcement of quality," says Morris A. Cohen, a professor of operations and information management at Wharton. "The tainted milk case was a terrible blow, but a problem with a flying plane is going to be far more dramatic with more repercussions if the planes have sold internationally."